Retailers avoid bancruptcy by renegotiating debts

Retailers running into financial difficulty are increasingly using company voluntary arrangements (CVAs) as a mechanism to restructure debts and stay afloat.

The number of retailers using CVAs jumped 15 percent from 41 in 2009 to 47 in 2010, according to a report by accountancy firm Wilkins Kennedy. However, insolvencies over the same period declined by 18 percent to 1290 in 2010, indicating that the CVA route is helping shopkeepers survive tough times.

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“The first wave of the recession picked off the weakest retailers, though with disposable incomes being squeezed by inflation, it might still be a while before the retail sector hits the bottom. So while insolvencies might have slowed down slightly, I expect that the increase in retail CVAs has yet to reach its peak,” said Anthony Cork, director at Wilkins Kennedy.